Wall Street is rethinking the key question of figuring out how much Tesla really valuable: Is it a shabby automaker or a high-growth tech company?
It’s a reasonable argument considering the challenges Tesla faces. And even after the brutal sell-off of stocks over the past year, Elon Muskyour company still has a larger market valuation Ford engine company, General Motors Co. and Toyota Motor Corporation. – combine. Now, analysts and investors are beginning to doubt that this premium is justified.
“There is more and more debate among institutional investors about how to value Tesla – car or technology? In our view, the answer lies in growth,” Wells Fargo analyst Colin Langan wrote in a note on Friday. “We are concerned that growth seems to have slowed in China and the United States, potentially explaining the recent price drop.”
Tesla shares fell as much as 6.4% to $115.66 in New York on Friday after the company slashed prices for its product line in the US and Europe. Still, the stock is trading at 24 times its next 12-month earnings estimate, not far from the average multiple of 21 of the tech-heavy Nasdaq 100 Index. While, GM estimated at 5.8 times and Ford at 6.6 times.
Concern that demand for the company Electric Car may be taking a hit after Tesla’s third-quarter deliveries fell short of expectations. But investors’ anxiety increased amid a flurry of news in late December and early this month, including a production halt in China, news of a sharp drop in prices in the US and the Most importantly, deliveries in the fourth quarter were also disappointing.
The prospect of a recession in the US doesn’t help either. Consumers, pressured by persistently high inflation, rising interest rates and now a period of economic uncertainty, are expected to refrain from buying expensive items, such as cars. Electric vehicles, which are typically more expensive than gas-powered vehicles, are set to see demand weaken at least in the short term.
Average analysts’ estimates now reflect Tesla’s revenue expectations of a 33% increase in 2023, which, while significant, is still below Tesla’s own long-term outlook of a 50% increase. Meanwhile, GM’s revenue is expected to grow 2.6% this year and Ford’s by 1.6%.
Once that strong growth also comes with high profits. But the latest price drop suggests that is quickly becoming a thing of the past.
“Overall, given the challenging landscape for fiscal 2023, we believe Tesla must decide whether to sacrifice volume growth or gross margin, and base its pricing actions on its pricing actions. , the answer seems to be gross margin,” Guggenheim analyst Ronald Jewishikow wrote in a note Friday. , while downvoting its recommendation on the stock to sell from buy.
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